In the face of speculation that Allergan is interested in buying Biogen, exasperated Allergan CEO Brent Saunders on Monday maintained again that the company would only do smaller "stepping stone" deals instead of something transformative.

But his disavowal comes as Allergan's balance sheet gets a $27.6 billion dollar infusion from selling its generics business to Teva. Allergan is sitting on an enormous pile of cash, and it will feel the itch to spend it. It may not spend it on Biogen, but billions of dollars' worth of smaller deals could be plenty transformative.

Unbecoming Modesty

Allergan shares dropped after a revenue miss and cautious guidance on the use of its new cash pile.

Source: Bloomberg

Intraday times are displayed in ET.

Allergan argues it has so much growth potential in its current assets and pipeline that it doesn't need a big deal. Strong sales of Botox and constipation treatment Linzess, and new drug launches such as the chin-fat treatment Kybella, are bright spots. But sales of Alzheimer's drug Namenda, which lost market exclusivity last year, are falling. Another best-seller, the dry-eye drug Restasis, faces competition from a treatment made by Shire that was approved by the FDA in July.

Allergan does not set shy goals; it aims to consistently hit double-digit top-line growth. Maintaining that in the long run will likely require some acquisitions. Allergan describes its business model as "growth pharma" -- it centers on skipping the risky, early discovery stages of drug development and buying pipeline prospects.

The Teva deal has put Allergan in a good position for that, as its second-quarter results revealed on Monday. It has paid down $9 billion in debt since the end of the first quarter. It has paid off all its term loans. It has gone from one of the most leveraged big companies in pharma to one of the least.

Easing Off the Lever

Allergan's cash infusion from Teva has left it less levered and much more flexible

Source: Bloomberg

Bloomberg calculated figures, except for Allergan's, which are from the company's 8/8 earnings presentation.

Right now, the company has more cash and marketable securities, at $27.6 billion, than any pharma or biotech company except for Johnson & Johnson and Amgen.

Cash is King

Allergan now has more dry powder for acquisitions than just about any other company.

Source: Bloomberg/Allergan

Five billion dollars of that cash is earmarked for buybacks, which should be completed by the end of this year. If market conditions warrant, then it may buy back another $5 billion next year. But Saunders said Allergan doesn't expect to be a chronic stock repurchaser; investing in growth comes first.

Allergan said it might spend more cash to reduce debt, though it offered no guidance on that front, and expects $1.3 billion in net interest expense this year. RBC analyst Randall Stanicky wrote in a note that this suggests Allergan will hold onto a lot of its cash and financial flexibility.

The company's sale of its generic distribution business Anda to Teva, announced August 3, will add another $500 million in cash. That deal is part of a transition to branded drugs, which a substantial acquisition could further cement.

And new inversion rules, prompted by Pfizer's failed attempt to purchase Allergan, make it far easier for the Irish-domiciled company to acquire than be acquired.

Whether it builds the equivalent of a blockbuster deal Frankenstein-style out of a bunch of companies, or does it all at once, it's clear Allergan's growth pharma model is going to get its fuel.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.